The curious case of HP, Autonomy and the scandal that won't quit

HPE exorcises Autonomy demons with software spin-off
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Hewlett Packard Enterprise (HPE) on Friday finally managed to shake off the disastrous legacy of its Autonomy acquisition with the successful spin-off of its software business. The company has now narrowed its focus to data centre software and hardware.

Back in 2011, HP (four years before it split into HP Inc and HPE) acquired the British software firm for $10.3 billion (£6.7 billion), a figure many shareholders believed was too much. Those skeptics would prove to be right, with turmoil unfolding at HP including major board changes and the axing of 27,000 staff. HP would then follow this up in late 2012 with the announcement of an $8.8 billion write-down related to the acquisition. Over $5 billion of that due to alleged 'accounting irregularities'. Around the same time, investors began legal action over how the takeover was handled.

What would then proceed to happen was a PR war between both camps, with former Autonomy CEO Mike Lynch referring to "non-specific but highly damaging allegations" from HP. Even the US Justice Department was dragged into the mix, along with the US Securities and Exchange Commission. Several months later in March 2013, the litigation spilled out across the Atlantic, with both the UK’s Serious Fraud Office and Financial Reporting Council (FRC) looking into Autonomy's published financial reports.

The following year, ex-Autonomy chief financial officer Sushovan Hussain tried to block the settlement of serveral shareholder lawsuits, claiming that HP was attempting a cover up. In response, HP accused Hussain of being "one of the chief architects of the massive fraud on HP". A Northern Californian judge would reject HP's proposed settlement with its shareholders in December, with the Serious Fraud Office dropping the case against HP the following month.

Lynch then in March 2015 came back and attempted to sue HP for in excess of £100 million over what he called a 'smear campaign'. This came literally one day after the company filed a case against Lynch and Hussain for £3.4 billion ($5.1 billion) in damages, alleging fraudulent activity during their time at Autonomy. In June, HP announced a $100 million settlement agreement with lead plantiff in the securities class action suit which arrised from impairment charges PGGM Vermogensbeheer.

In October, around the time that HP would split into HPE and HP Inc, Lynch went to the UK High Court, seeking $150 million in damages, due to allegations made. That came shortly after court documents emerged, revealing that HP was aware of dodgy accounting practices at Autonomy prior to the acquisition. 

The end was in sight in September 2016 as HPE shifted out Autonomy as a part of an $8.8 billion 'spin-merger' deal with MicroFocus. That deal involved a $2.5 billion cash payment to HPE, and HPE shareholders having 50.1 per cent ownership of the new combined company.

Now, finally after over half a decade of controversy and vitriol, HPE has closed the book on the Autonomy nightmare, fully relinquishing any part of the company that still remained. “Autonomy was a distraction – a big one – and HPE can now stop spending its energy on defending its decision and dealing with the aftermath,” said Glenn O’Donnell, a Forrester Research analyst.

The legal case between HPE and Lynch is still set to continue however, with the parties due in a London court next year over a $5.1 billion legal battle.

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